Retailers are so worried about fraudulent purchases online, many say they’re rejecting legitimate transactions out of fear that they may be fake.
Sixty-seven percent of retailers have online security measures that are quick to cancel any transaction that raises suspicion, according to a survey by Experian, a global information-services company. When gauging all businesses – a group that also includes banks and telecommunications companies – that figure rises to 71%.
The concerns are causing companies to leave money on the table, as they go to ever-greater lengths to prevent hacking attacks and Internet security breaches.
Companies have a strong incentive to err on the side of caution: Shares of Chipotle Mexican Grill Inc plummeted last year after it disclosed a data breach, while the news that hackers stole the personal information of millions from Equifax Inc sparked a class action lawsuit and outrage across the US.
“There is no silver bullet when it comes to stopping fraud,” said Kathleen Peters, senior vice-president of global fraud and identity at Experian. “Retailers really have to find this way to show consumers that they’re protecting them and balance that with an online experience that’s not too heavy-handed.”
While only 5% of data breach incidents involve the retail sector, according to a Verizon report last year, the incidents are highly visible since they generally involve well-known brands. At the same time, instances of fraud seem to be on the rise: 63% of businesses told Experian their losses from fraud in the last 12 months were the same or higher than a year earlier.
The study was based on interviews with 5,500 consumers and 500 business executives in 11 world markets.
Companies are contending with criminals who are becoming more organised and creative in the ways they impersonate legitimate customers online, Peters said. The best way to counter this is to develop technology that lets them better identify legitimate customers. Creating layered security that protects customers without making transactions more cumbersome is still no easy task, she said.
“They’re in this position because people are moving online quickly and the retail experience is changing,” she said.